The pandemic windfall
Large companies and the very rich made a killing last year, while the U.S. wealth gap became wider than ever
Large companies and the very rich made a killing last year, while the U.S. wealth gap became wider than ever. Here's everything you need to know:
Who has benefited? Tech giants, many major corporations, and Wall Street investors have had eye-popping gains during the pandemic, even as the COVID-19 recession has devastated major sectors of the economy. Apple's total stock value climbed to $2.29 trillion, up 133 percent since March. Amazon's share price increased by 70 percent. As the stock market set records — fueled by stuck-at-home Americans dependent on online shopping and aggressive Federal Reserve interventions — the fortunes of the 659 U.S. billionaires grew by more than $1 trillion, making the elite group's wealth nearly double that of the bottom 50 percent of Americans — 165 million people. Meanwhile, just 12 million jobs of the 22 million lost last spring have been recovered, and more than 400,000 small businesses have closed for good. Economists predict a "K-shaped" recovery, with the poor getting poorer and the rich getting richer, especially those at the very top.
Who did best? Amazon CEO Jeff Bezos' net worth has rocketed up $70 billion, to an estimated $182 billion, and four men have joined him in the ranks of "centibillionaires": Facebook CEO Mark Zuckerberg, whose wealth increased by about 80 percent; Microsoft co-founder Bill Gates, who made about $20 billion; French luxury brand tycoon Bernard Arnault, whose fortune doubled to $117 billion; and Tesla CEO Elon Musk, the world's richest man as of last week. With investors betting that the pandemic will accelerate the shift to electric cars, Musk's net worth grew from $24.6 billion in March to $185 billion now — perhaps the fastest accumulation of wealth ever. Google's Larry Page and Oracle's Larry Ellison saw their wealth grow by a mere 40 percent.
Why the big payday? Life under quarantine has been a boon for e-commerce retailers like Amazon, Target, Walmart, and Best Buy; food delivery services like DoorDash; and streaming services like Netflix. Restless consumers not spending money on restaurants and travel are splurging at Home Depot and Lowe's for home-improvement projects, and on video games for escapism. Restaurant chains that prioritize drive-through and takeout, like McDonald's and Popeye's, are thriving, while communications services Zoom and Slack hit the jackpot when millions of Americans began working from home. Independent merchants and brick-and-mortar retailers can barely compete, because of pandemic restrictions and well-founded public fear of indoor gatherings, and have lost so much market share that it could put them at a permanent, dire disadvantage. "Once you kill competition, it's always hard to restore it," said Matt Stoller, director of research at the American Economic Liberties Project. "This is an extinction-level event for small businesses."
How are workers faring? It depends on their tax bracket. White-collar job losses were mostly recovered by late summer, while millions of low-wage workers remain out of work, especially in restaurant, hotel, and other service industries. The majority of last year's layoffs occurred at small businesses, millions of which could go under as massive COVID-19 surges force states to reimpose safety restrictions. Those crackdowns led the U.S. to lose 140,000 jobs in December, the first month of losses since the early months of the pandemic. Tent encampments of homeless people dot cities across the U.S., and in the week before Thanksgiving, 26 million adults said their households were short on food.
Is the wealth gap widening? Profoundly. About 84 percent of stocks owned by U.S. households are held by the wealthiest 10 percent of Americans. Without the chance to spend their money eating out, attending cultural events and ballgames, or traveling, affluent Americans have every incentive to save and invest. Millions of workers, on the other hand, have lost jobs or seen their hours or pay reduced and are barely scraping by. Nearly 12 million renters owe thousands in back rent and utilities, according to Moody's Analytics. The $2.2 trillion relief package that Congress passed in March initially caused overall poverty to decline, thanks to $1,200 stimulus checks and a $600 weekly federal unemployment supplement. By August, however, poverty had returned to pre-pandemic levels.
How does the future look? For big corporations, bright. Wall Street is bullish, expecting a recovery similar to the one that followed the 2008 crisis, when large banks and private-equity firms gobbled up weakened competitors at fire-sale prices, and the top 1 percent of earners took in 95 percent of income gains made from 2009 to 2012. Inequality scholar Chuck Collins of the Institute for Policy Studies says that as consumers learn to depend entirely on giant corporations, it becomes increasingly difficult for damaged small businesses to compete, resulting in empty downtowns and more and more wealth concentrated among conglomerates and billionaires. "We're at risk of seeing an oligarchic death spiral," Collins said.
Not much trickle-down When the economy cratered, several prominent CEOs vowed to look after their workers. Chuck Robbins, CEO of the software giant Cisco, said in April, "It's just silly for those of us who have the financial wherewithal to absorb this, for us to add to the problem." But four months later, Cisco began laying off thousands of employees. The Washington Post found that although 45 of the top 50 publicly traded U.S. firms turned a profit last year, 27 of them laid off employees, collectively cutting more than 100,000 workers. As billions of dollars were paid out to investors, record profits did not trickle down to workers, not even to those whose jobs in warehouses or checkout lines put them at risk of infection. Amazon raised its minimum wage of $15 an hour and hired more than 250,000 new workers, paying warehouse workers an extra $2 an hour during the early months of the pandemic before ending that practice this summer. But Bezos' wealth has soared by $11.5 million every hour. The three heirs to Walmart founder Sam Walton have seen their fortunes grow by $40.7 billion, or 26 times the total hazard pay Walmart provided its entire workforce of 1.5 million associates last year. Thousands of Amazon and Walmart employees still have incomes so low they receive food stamps, meaning that taxpayers subsidize these booming businesses.
This article was first published in the latest issue of The Week magazine. If you want to read more like it, you can try six risk-free issues of the magazine here.